What to Avoid When Filing for Bankruptcy

Interviewer: What happens with 7's and 13's? Let's talk about mistakes. What mistakes do people make that hurt their case or cause the bankruptcy to fall apart?

Full Disclosure Is a Necessary Requirement of a Successful Bankruptcy Filing

Vance: One of the biggest things is disclosure. You must disclose all of your assets. Disclosing any transfers you've done over the last two years. Disclosing any real estate you've owned in the last four years. Disclosing any business you've had.

Attorney Truman Takes the Time to Go Through the Process Line By Line

Disclosure is key to a successful filing. That's why when a client comes in and I sit down and go through everything with them, I have a 25 page questionnaire that we go through line by line and I ask them these questions.

A good number of attorneys in the area where I practice will give you this questionnaire and tell you take it home and fill it out and bring it back. You're going to struggle over it for two to four hours answering these questions.

You Will Always Deal Directly with Attorney Truman, Not a Paralegal or Clerk

And there are other attorneys in my area that will turn you over to their paralegal or their legal assistant to do the questionnaire. I don't operate that way. I go over the questionnaire with you myself, so if any red flags come up while I'm asking these questions we know about it ahead of time. We can discuss what's going to happen and how to avoid it. It's very important that you disclose all your income, all your assets, all your liabilities, all your creditors. Disclosure is one of the big problems.

Are There Common Assets Left Out of Asset Disclosure?

Interviewer: Let's get deeper on that. What are some of the red flags you've seen regarding less than full disclosure on people's applications?

Vance: Let's say you have an automobile and you decide to give it to your child. Well, you have to disclose that if it's done within two years of the filing of a bankruptcy. You have to disclose that transfer. If you have a piece of real estate that you sell or transfer, you have to disclose that for four years.

Real Estate Transactions Are Subject to a Four Year Look-back Period

There's a four year look-back period, transfer of any piece of real estate when you file bankruptcy. If you have a house, and you think, "Well, I'm going to give this house to my son or my daughter, and then I'm going to file bankruptcy."

Well, if you do that and you don't wait four years, the trustee can go back and void the transfer and recover that house, sell it, and give the money to your creditors.